Condensed Consolidating Financial Information

The Company provides condensed consolidating financial information for its subsidiaries that are guarantors of its registered debt. As of March 31, 2013, the subsidiary guarantors, which are 100% owned by the Company, have jointly and severally guaranteed, on a full, unconditional and unsecured basis, the Company’s 8.75% Senior Notes due 2020, 7.5% Senior Notes due 2021, 8.125% Senior Notes due 2022 and 7.5% Senior Notes due 2023. The Senior Floating Rate Notes, prior to their purchase and redemption in 2012, were also jointly and severally guaranteed, on a full, unconditional and unsecured basis by the subsidiary guarantors. The subsidiary guarantees: (i) rank equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii) rank senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii) are effectively subordinated in right of payment to any existing or future secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations; (iv) are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors who are not themselves subsidiary guarantors; and (v) are only released under certain customary circumstances. The Company’s subsidiary guarantors guarantee payments of principal and interest under the Company’s registered notes.

The following condensed consolidating financial information represents the financial information of SandRidge Energy, Inc., its wholly owned subsidiary guarantors and its non-guarantor subsidiaries, prepared on the equity basis of accounting. The non-guarantor subsidiaries, including consolidated VIEs, majority owned subsidiaries and certain immaterial wholly owned subsidiaries, are included in the non-guarantors column in the tables below. The financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the subsidiary guarantors operated as independent entities.

Condensed Consolidating Balance Sheets



	March 31, 2013
	Parent		Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	1,285,392	$	16,091		$	7,250	$	—		$	1,308,733
Accounts receivable, net	—		1,554,283			715,628		(1,880,512		)	389,399
Derivative contracts	—		19,359			18,165		(11,831		)	25,693
Prepaid expenses	—		39,992			167		—			40,159
Other current assets	1,375		19,585			4,214		—			25,174
Total current assets	1,286,767		1,649,310			745,424		(1,892,343		)	1,789,158
Property, plant and equipment, net	—		4,515,107			1,276,084		(55,585		)	5,735,606
Investment in subsidiaries	5,119,024		(30,760		)	—		(5,088,264		)	—
Derivative contracts	—		19,288			27,163		(21,232		)	25,219
Other assets	69,005		65,196			29		(5,902		)	128,328
Total assets	$	6,474,796	$	6,218,141		$	2,048,700	$	(7,063,326	)	$	7,678,311
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	1,330,207	$	532,220		$	688,833	$	(1,878,888	)	$	672,372
Derivative contracts	—		24,801			—		(11,831		)	12,970
Asset retirement obligations	—		91,113			—		—			91,113
Other current liabilities	—		5,798			—		—			5,798
Total current liabilities	1,330,207		653,932			688,833		(1,890,719		)	782,253
Long-term debt	3,200,445		—			—		(5,902		)	3,194,543
Derivative contracts	—		61,616			—		(21,232		)	40,384
Asset retirement obligations	—		367,256			200		—			367,456
Other long-term obligations	1,870		16,313			—		—			18,183
Total liabilities	4,532,522		1,099,117			689,033		(1,917,853		)	4,402,819
Equity
SandRidge Energy, Inc. stockholders’ equity	1,942,274		5,119,024			1,359,667		(6,535,900		)	1,885,065
Noncontrolling interest	—		—			—		1,390,427			1,390,427
Total equity	1,942,274		5,119,024			1,359,667		(5,145,473		)	3,275,492
Total liabilities and equity	$	6,474,796	$	6,218,141		$	2,048,700	$	(7,063,326	)	$	7,678,311



	December 31, 2012
	Parent		Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	300,228	$	922		$	8,616	—			$	309,766
Accounts receivable, net	2,162,471		808,435			717,715		(3,243,115		)	445,506
Derivative contracts	—		60,736			28,484		(18,198		)	71,022
Prepaid expenses	—		31,135			184		—			31,319
Restricted deposit	—		255,000			—		—			255,000
Other current assets	1,375		24,188			4,709		—			30,272
Total current assets	2,464,074		1,180,416			759,708		(3,261,313		)	1,142,885
Property, plant and equipment, net	—		7,236,685			1,298,877		(55,585		)	8,479,977
Investment in subsidiaries	5,425,907		(86,235		)	—		(5,339,672		)	—
Derivative contracts	—		15,957			33,114		(25,454		)	23,617
Other assets	83,642		66,512			—		(5,902		)	144,252
Total assets	$	7,973,623	$	8,413,335		$	2,091,699	$	(8,687,926	)	$	9,790,731
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	1,236,793	$	2,087,046		$	684,136	$	(3,241,431	)	$	766,544
Derivative contracts	2,394		30,664			—		(18,198		)	14,860
Asset retirement obligations	—		118,504			—		—			118,504
Deposit on pending sale	—		255,000			—		—			255,000
Other current liabilities	—		15,546			—		—			15,546
Total current liabilities	1,239,187		2,506,760			684,136		(3,259,629		)	1,170,454
Long-term debt	4,306,985		—			—		(5,902		)	4,301,083
Derivative contracts	—		85,241			—		(25,454		)	59,787
Asset retirement obligations	—		379,710			196		—			379,906
Other long-term obligations	1,329		15,717			—		—			17,046
Total liabilities	5,547,501		2,987,428			684,332		(3,290,985		)	5,928,276
Equity
SandRidge Energy, Inc. stockholders’ equity	2,426,122		5,425,907			1,407,367		(6,890,543		)	2,368,853
Noncontrolling interest	—		—			—		1,493,602			1,493,602
Total equity	2,426,122		5,425,907			1,407,367		(5,396,941		)	3,862,455
Total liabilities and equity	$	7,973,623	$	8,413,335		$	2,091,699	$	(8,687,926	)	$	9,790,731

Condensed Consolidating Statements of Operations



	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)

Three Months Ended March 31, 2013
Total revenues	$	—		$	440,318		$	77,536		$	(6,164	)	$	511,690
Expenses
Direct operating expenses	—			163,611			12,241			(5,792		)	170,060
General and administrative	87			76,819			2,970			(432		)	79,444
Depreciation, depletion, amortization and accretion	—			159,889			22,752			—			182,641
Loss on derivative contracts	—			30,900			9,997			—			40,897
Loss on sale of assets	—			290,956			107,218			—			398,174
Total expenses	87			722,175			155,178			(6,224		)	871,216
Loss from operations	(87		)	(281,857		)	(77,642		)	60			(359,526		)
Equity earnings from subsidiaries	(306,884		)	(26,641		)	—			333,525			—
Interest (expense) income	(86,103		)	192			1			—			(85,910		)
Loss on extinguishment of debt	(82,005		)	—			—			—			(82,005		)
Other income (expense), net	—			1,422			(811		)	—			611
Loss before income taxes	(475,079		)	(306,884		)	(78,452		)	333,585			(526,830		)
Income tax expense	4,321			—			108			—			4,429
Net loss	(479,400		)	(306,884		)	(78,560		)	333,585			(531,259		)
Less: net loss attributable to noncontrolling interest	—			—			—			(51,919		)	(51,919		)
Net loss attributable to SandRidge Energy, Inc.	$	(479,400	)	$	(306,884	)	$	(78,560	)	$	385,504		$	(479,340	)
Three Months Ended March 31, 2012
Total revenues	$	—		$	322,226		$	91,193		$	(31,784	)	$	381,635
Expenses
Direct operating expenses	—			114,066			41,752			(31,660		)	124,158
General and administrative	86			48,113			2,433			(331		)	50,301
Depreciation, depletion, amortization, accretion and impairment	—			90,917			13,269			—			104,186
Loss on derivative contracts	—			220,935			33,711			—			254,646
Total expenses	86			474,031			91,165			(31,991		)	533,291
(Loss) income from operations	(86		)	(151,805		)	28			207			(151,656		)
Equity earnings from subsidiaries	(94,527		)	(2,303		)	—			96,830			—
Interest expense, net	(66,706		)	(13		)	(246		)	—			(66,965		)
Other income, net	—			59,594			—			(57,126		)	2,468
Loss before income taxes	(161,319		)	(94,527		)	(218		)	39,911			(216,153		)
Income tax (benefit) expense	(60		)	—			131			—			71
Net loss	(161,259		)	(94,527		)	(349		)	39,911			(216,224		)
Less: net income attributable to noncontrolling interest	—			—			—			1,954			1,954
Net loss attributable to SandRidge Energy, Inc.	$	(161,259	)	$	(94,527	)	$	(349	)	$	37,957		$	(218,178	)

Condensed Consolidating Statements of Cash Flows



	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Three Months Ended March 31, 2013
Net cash provided by (used in) operating activities	$	2,192,056		$	(2,142,481	)	$	68,705		$	3,177		$	121,457
Cash flows from investing activities
Capital expenditures for property, plant, and equipment	—			(421,876		)	—			—			(421,876		)
Proceeds from sale of assets	—			2,559,371			3			—			2,559,374
Other	—			16,947			—			(21,995		)	(5,048		)
Net cash provided by investing activities	—			2,154,442			3			(21,995		)	2,132,450
Cash flows from financing activities
Repayments of borrowings	(1,115,500		)	—			—			—			(1,115,500		)
Premium on debt redemption	(61,997		)	—			—			—			(61,997		)
Other	(29,395		)	3,208			(70,074		)	18,818			(77,443		)
Net cash (used in) provided by financing activities	(1,206,892		)	3,208			(70,074		)	18,818			(1,254,940		)
Net increase (decrease) in cash and cash equivalents	985,164			15,169			(1,366		)	—			998,967
Cash and cash equivalents at beginning of year	300,228			922			8,616			—			309,766
Cash and cash equivalents at end of period	$	1,285,392		$	16,091		$	7,250		$	—		$	1,308,733
Three Months Ended March 31, 2012
Net cash (used in) provided by operating activities	$	(48,637	)	$	202,554		$	78,163		$	(1,170	)	$	230,910
Cash flows from investing activities
Capital expenditures for property, plant, and equipment	—			(572,334		)	(29,507		)	—			(601,841		)
Proceeds from sale of assets	—			267,001			2,007			—			269,008
Other	—			56,658			1			(67,170		)	(10,511		)
Net cash used in investing activities	—			(248,675		)	(27,499		)	(67,170		)	(343,344		)
Cash flows from financing activities
Proceeds from the sale of royalty trust units	—			—			—			98,849			98,849
Other	(31,623		)	45,973			(50,095		)	(30,509		)	(66,254		)
Net cash (used in) provided by financing activities	(31,623		)	45,973			(50,095		)	68,340			32,595
Net (decrease) increase in cash and cash equivalents	(80,260		)	(148		)	569			—			(79,839		)
Cash and cash equivalents at beginning of year	204,015			437			3,229			—			207,681
Cash and cash equivalents at end of period	$	123,755		$	289		$	3,798		$	—		$	127,842